Ericsson AB, the biggest supplier of wireless networks, agreed to merge its unprofitable handset business with that of Sony Corp, the No. 2 maker of consumer electronics, to help stem losses and gain market share.
Each company will own 50 percent of the venture, said Aase Lindskog, an Ericsson spokeswoman.
The companies, which said last week they planned to ally, will give more detail on press meetings in Stockholm and Tokyo today.
Joining Sony will help Ericsson improve design and marketing, analysts said. Chief Executive Kurt Hellstroem has rejected calls from investors to get rid of the phone business altogether because Ericsson needs the handsets to help win network orders. Together, Sony and Ericsson will control a tenth of the mobile phone market, still lagging Nokia Oyj's third and Motorola Inc's 15 percent.
The alliance "is part of the industry's reorganization, where Japanese makers are profitable at home while all European makers, except for Nokia, are suffering," said Tomohiko Miyazaki, an analyst at Nomura Securities Co's financial research center.
"It wouldn't be surprising to see further reorganization." Ericsson shares jumped 2.5 kronor, or 4.6 percent, to 57.5, having lost a fifth of their value in the past two sessions.
Sony's shares fell ?60, or 0.7 percent, to 8,930.
Sony was to hold a press conference in Tokyo at 6pm local time, it said in an e-mail sent to news organizations. Ericsson was due to hold a news conference in Stockholm at 11am local time.
Hellstroem, who will attend the Stockholm press meeting, will become chairman of the venture, while Katsumi Ihara, head of Sony's mobile-phone business, will be its chief executive, the Wall Street Journal reported without naming its sources.
Sony President Kunitake Ando, who spearheaded the company's entry to the personal computer market, was down to attend the Tokyo press briefing. Morgan Bengtsson, president of Nippon Ericsson KK, Ericsson's Japanese unit, was also to attend.
Ericsson's market share in cellular phones shrank to between 6 and 8 percent in the first quarter from 10 percent at the end of last year, Chief Financial Officer Sten Fornell said Friday.
The company has struggled with its phones for two and a half years, partly as it failed to introduce enough models to lure new, cost-conscious users and because of delays in the production of more expensive phones. The business, which now accounts for about 13 percent of sales, lost 5.7 billion kronor in the first quarter.
Stockholm-based Ericsson is eliminating jobs, farming out manufacturing and seeking alliances to cut expenses. The company, which aims to reduce costs by 38 billion kronor from 2002, and rivals such as Motorola and Alcatel SA are suffering as debt-strapped operators reduce network orders and handset sales slow.
On Friday, Ericsson cut its forecast for industry cellular-phone sales this year to between 430 million and 480 million, from a previous estimate of 450 million to 525 million.
While Sony doesn't rank among the 10 biggest handset makers, it has developed mobile phones that allow users to insert memory cards storing music. Those handsets are sold through NTT DoCoMo Inc and KDDI Corp, Japan's two biggest mobile-phone operators.
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